Recent Buy – Canadian Utilities Ltd

CU

August generally tends to be a rough month in the markets and brings plenty of volatility. Coupled that with the ongoing jitteriness of interest rate hike fears in the US and recession fears in Canada – there are some interesting opportunities out there. Regardless, I continue to purchase looking for good opportunities trying to tune out the noise. Whenever I make a purchase, I like to share my buys to document and illustrate how I am building my income stream over the course of months/years. My main goal is simply to keep investing at regular intervals and build my passive income over the course of time. In staying true to tradition, here’s another purchase in my portfolio, this time adding a new company to my portfolio.

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Recent Buy – Algonquin Power & Utilities Corp

AQN

A fourth purchase in the month of July! This is turning out to be quite an active month for my portfolio. Whenever I make a purchase, I like to share my buys to document and illustrate how I am building my income stream over the course of months/years. My main goal is simply to keep investing at regular intervals and build my passive income over the course of time. In staying true to tradition, here’s another purchase introducing a new holding to my portfolio.

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Sector Overview – Utilities

utilities

The utilities sector has seen a fair bit of correction as investors have sold off this bond-substitute as the interest rate jitters took hold of emotions. The Utilities SPDR ETF (XLU) is down approx 9% YTD. This has pushed the valuation to attractive levels for some utilities and I am looking to initiate positions in this sector. Regular readers of this blog are familiar that I recently sold my position in a utilities ETF (BMO Utilities ETF – ZUT.TO) that had exposure only to 12 companies and all exposed only to the Canadian economy. There were a few other reasons for selling that ETF – one of the main ones was the fact that I wanted dividend growth from my holdings. In my quest to narrow down utilities and find one to invest in, I have been doing some research and decided to share the details on how I am narrowing down my pickings. This way, you can see how I am picking my investments. Feel free to share your thoughts and comments below.

Note that the tables below show the data that interests me. The columns are extracted from Dave Fish and Michael Weber’s CCC lists. Other investors may give more weight to other metrics (including myself). While this exercise is supposed to help me narrow down companies to research, I may go back and revisit the whole list and start looking into researching even if it failed on one criterion which caused it to get dropped from the list.

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Recent Sell – BMO Utilities ETF

BuySell

A sector that has been under-represented in my portfolio has been the Utilities sector. The only exposure I had to the sector was via an ETF – BMO Equal Weight Utilities Index ETF (ZUT.TO). Even though the exposure has been small and the only one, I decided to liquidate my holdings in the ETF and will be looking to purchase some stocks in the sector instead. The ETF provided good stability and regular monthly income. However, there were a few things that bothered me that caused me to sell the position.

  • After owning the fund for close to 3 years, the fund price has remained flat – although I was earning 4% on the investment. While I dont really look for capital gains per se, I know that the income isnt being compounded as is achievable via dividend growing companies.
  • A thin exposure of just 12 companies – all in the Canadian sector, although some companies have operations in the US.
  • An expense ratio of 0.55% for owning just 12 companies! I dont really gain much of a diversification and dont see the value of paying 0.55% for such a thin ETF.
  • In addition, more than 10% of the exposure to one company – Just Energy Group Inc (JE.TO), which last time I checked had some horrible financial figures. I do not want any exposure to this company – let alone a 10% exposure while paying that damn fee for the privilege of investing.
  • No dividend growth.

With this sale, I lose $90.48 in forward annual dividends.

What’s next for those funds from the sale? I am looking to pick up some shares in individual utility companies. Some of the companies on my shortlist are:

  • Diversified Utilities
    • Algonquin Power & Utilities Corp (AQN.TO)
    • Atco Ltd (ACO.X.TO) / Canadian Utilities (CU.TO)
    • Brookfield Infrastructure Partners LP (BIP.UN.TO)
    • Brookfield Renewable Energy Partners LP (BEP.UN.TO)
    • Duke Energy Corp (DUK)
  • Electric Utilities
    • Consolidated Edison Inc (ED)
    • Fortis Inc (FTS.TO)
    • The Southern Company (SO)
  • Water Utilities
  • Natural Gas Utilities
    • ONEOK Inc (OKE)

What are your thoughts on these companies mentioned? Are there any other companies that I should be looking at?

American Water Works (AWK) Dividend Stock Analysis

AWK

American Water Works Company (AWK) is the largest publicly traded water company serving approx 15 million people in US and Canada. In serving the 15M customers, the company boasts 48,000 miles of water pipelines serving 1,600 communities and 3.2M regulated customers. Water is an essential service, which we cannot live without and the current drought conditions in California have brought water and its implications (or rather, the lack there of) on society. Investing in water utilities can provide with possibly lucrative returns for investors.

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